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September 11, 2013

12 Real-World Steps to Buying a Practice

It seems that virtually every advisor is on the prowl these days to buy a book of business from a retiring advisor. When my phone rings, odds are pretty high that someone is calling to ask, “How can I buy a mature practice?”

Since there are no precise numbers easily available, it’s hard to know if there are 30, 50 or even 100 potential buyers for each solid advisory practice that comes onto the market. Regardless of the exact figure, the reality is clear: Competition is stiff, and success is far from assured.

How can advisors beat the odds and make an acquisition happen?

One popular strategy is to shop for a book of business online via websites that match buyers and sellers of advisory practices. (Everything from video games to CDs routinely gets sold online--not to mention Star Trek actor William Shatner’s kidney stone and Britney Spear’s half-eaten sandwich.)

Budding entrepreneurs raise money to launch new businesses on line. So why not buy a financial advisory practice online?

While an online format seems like an easy, convenient solution, it’s certainly not a method that a prospective buyer can count on to deliver the goods. (Sellers, of course, are in the driver’s seat, so the likelihood of their finding a suitable match online is quite high.)

If you’re serious about getting married, you might put up a profile on match.com. But it’s not the only thing you would do. It’s just one piece in the complex process.

If you want to find and then win the opportunity to buy a great business, you really need to follow a multi-step process. In fact, this process will need to be a new line of business within your practice. Why?

It requires its own campaign. You’ll need to devote a given number of hours per week and per month to achieve your goal.

In other words, prospecting must be an ongoing part of your week, and you must pursue it with the same passion and dedicated focus that you employ to build your advisory business.

Here are the detailed steps that advisors can take to make this acquisition process successful:

If you’re a wirehouse advisor, you should get to know the advisors in your branch who are approaching retirement. Determine which ones are most compatible with your style. Feel them out on your proposal at the appropriate point.

Call your advisor friends in other branches and get referrals to older advisors in their branch that you should approach.

Review online profiles of advisors in other branches to determine which might be good prospects.

If you’re moving to another firm, discuss your interest in partnering with an older advisor with the prospective branch manager and see if there are prospects for you in his branch.

Consider joining a branch with lots of older advisors.

Attend conferences, which are great opportunities for both wirehouse and independent advisors to forge alliances with senior producers at their firms. Independent advisors should attend conferences sponsored by custodians that attract advisors from other broker-dealers and RIAs.

Join and become active in advisor organizations like the FPA, IMCA etc.

If you’re affiliated with an independent broker-dealer or RIA custodian, talk to your firm’s succession-planning department. These groups try to match up buyers and sellers. Their staff members are happy to help, because they want to keep assets with the home team. Discuss your plans with them. Wirehouses and regionals will probably have similar departments at some point, too.

Similarly, independents should seek out the assistance of their custodian’s relationship managers or business-development team. Their job is to service the needs of independent firms.

Pick up the phone and call the wholesalers in your territory. They can be a fantastic resource.